Gottschalks puts quarter in bank

Putting behind it store-closing costs that dogged the bottom line a year ago, Gottschalks Inc. recorded a second quarter profit of $350,000, up from $25,000 the prior year.

The second quarter has historically run at a loss, and Jim Famalette, president and CEO, said despite a dip in sales, "our bottom line net results were the best for a second quarter in more than 15 years."

Sales in the period slipped 1.3 percent, to $147.8 million from $149.8 million last year. Same-store sales declined 1.3 percent.

Average gross margin thinned 30 basis points, or three-tenths of a percentage point, to 35.4 percent from 35.7 percent a year ago. "Our gross margin was somewhat impacted by lower sales, as we continued to implement a markdown strategy focused on maintaining strong inventory controls."

"However, as part of our effort to improve our merchandise flow, through better planning and allocation, we ended the quarter with nearly 3 percent less inventory on a comparable basis and continued to improve our inventory turn," he added.

Operating costs climbed 60 basis points, or six-tenths of a percentage point, to 32.8 percent of sales from 32.2 percent the preceding year.

Gottschalks Inc.

Qtr. 7/31 (x000)

2004

2003

% chg

Sales

$147,776

$149,757

-1.3

Oper. Income (EBIT)

5,237

6,522

-19.7

Net income

350a

25a

—

Per share (diluted)

0.03

0.00

—

Average gross margin

35.4%

35.7%

—

SG&A expenses

32.8%

32.2%

—

Six months

2004

2003

% chg

Sales

292,309

287,672

1.6

Oper. Income (EBIT)

7,301

7,196

1.5

Net income

(1,759)b

(3,961)b

—

Per share (diluted)

(0.14)

(0.31)

—

Average gross margin

34.9%

34.8%

—

SG&A expenses

33.4%

3.5%

---

(loss)

a-Second quarter results include miscellaneous income of $465,000 versus $683,000 last year. The prior-year second quarter includes a $307,000 loss from discontinued operations.

b-Six-month results include $927,000 in miscellaneous income versus $1.1 million a year ago; an income-tax benefit of $1.1 million versus $1.9 million a year ago; a $1.7 million loss from continuing operations versus $1.9 million last year; and a $20,000 loss from discontinued operations versus a $731,000 prior-year loss.